The National Pension Service (NPS), South Korea’s state-run pension fund and the country’s largest institutional investor, has secured a landmark victory in Sweden, winning recognition that it is exempt from withholding tax on dividends from Swedish listed equities. The decision will return about 11.5 billion won ($7.8 million) to the fund and reduce its annual tax burden.
The Korean pension fund’s investment management department said on Thursday that the Swedish Tax Agency on Oct. 28 officially confirmed the NPS’ eligibility for dividend withholding-tax exemption and approved a refund of taxes already paid.
The ruling allows the NPS to reclaim about 11.5 billion won in dividend taxes paid between 2016 and 2020.
The decision will also save the NPS some 8.6 billion annually based on its 2024 dividend-withholding liability.
An additional 11.8 billion won paid between 2021 and 2024 is now undergoing a separate refund process, according to NPS officials.
FIRST KOREAN PENSION FUND TO GET SUCH STATUS
The breakthrough marks the first time a Korean public pension fund has been granted tax-exempt status in Sweden, and only the second time globally that a foreign public pension has done so, following a similar case won by Finland’s public pension in Sweden earlier this year.
Although Sweden’s own public pension vehicle, the AP Funds, is exempt from such taxes domestically, the NPS has long been denied comparable treatment because it is a foreign entity.
In 2021, the Korean pension fund invoked the European Union’s non-discrimination principle, which bars EU members from treating comparable foreign institutions less favorably than domestic ones, and applied for equal tax treatment.
With no statutory deadline for a decision, however, the application languished for nearly five years.
The NPS continued to supply documents and consult tax advisers while pressing its case with Swedish authorities.
After Finland secured a favorable ruling in a parallel dispute in Sweden earlier this year, the NPS intensified its push and, in May, urged Sweden to expedite its verdict, ultimately winning a refund without resorting to litigation, said NPS officials.
EFFORTS ACROSS EUROPE
The decision strengthens the NPS’ efforts to recoup taxes across Europe.
Last year, the fund reclaimed about 8 billion won from Finland on similar EU grounds and is pursuing additional refunds in Germany, Italy, Austria and Poland.
Seo Won-joo, the NPS’ chief investment officer, said the win reflects persistent efforts to safeguard and grow the assets of Korean pensioners amid a complex cross-border tax landscape.
“We will continue to strengthen our tax review processes to support the fund’s stable long-term growth,” he said.
The Korean pension fund’s assets under management (AUM) surpassed 1,400 trillion won ($979 billion) at the end of October.
